Launching New Ventures An Entrepreneurial Approach 7th Edition Allen Test Bank 1

Solution Manual for Launching New Ventures An Entrepreneurial
Approach 7th Edition Allen 1305102509 9781305102507

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True / False
1. Drucker's five questions are the basis for the development of the business concept.
a. True
b. False
ANSWER: False
POINTS: 1
REFERENCES: Developing and Testing a Business Model, Intro
2. Business concepts are developed quickly and can be funded and operational within two days.
a. True
b. False
ANSWER: False
POINTS: 1
REFERENCES: 5.1 Understanding the Business Model
3. A business concept is a concise description of an opportunity that contains seven essential elements.
a. True
b. False
ANSWER: False
POINTS: 1
4. Business models are doomed to failure when the underlying logic about the future is incorrect.
a. True
b. False
ANSWER: True
POINTS: 1
5. The value proposition is the benefit that the company derives from the product or service it will producein other
words, it is the reason for the company to be in business.
a. True
b. False
ANSWER: False
POINTS: 1
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6. One vital question, often answered incorrectly is “Who is the customer?” .
a. True
b. False
ANSWER: True
POINTS: 1
7. How to deliver the benefit to the customer is the issue addressed by the distribution channel element of the business
concept.
a. True
b. False
ANSWER: True
POINTS: 1
8. Uncertainty can be eliminated from the future by use of a solid business plan.
a. True
b. False
ANSWER: False
POINTS: 1
9. Once created, a properly constructed and researched business model will not need to change.
a. True
b. False
ANSWER: False
POINTS: 1
REFERENCES: 5.2 Testing and Validating Business Model Feasibility
10. It is not possible to innovate with business models; one must create the plan and stick to it.
a. True
b. False
ANSWER: False
POINTS: 1
REFERENCES: 5.3 Innovating with Business Models
Multiple Choice
11. The two fundamental activities that comprise a/an ____ are creating and capturing value.
a. business model
b. business plan
c. action plan
d. business concept
e. value network
ANSWER: a
POINTS: 1
REFERENCES: Developing and Testing a Business Model, Intro
12. A ____ is the community of partners, suppliers, and other members of the value chain with which the venture does
business.
a. customer network
b. value network
c. business network
d. shareholder network
e. None of these choices
ANSWER: b
POINTS: 1
13. Which of the following is not a component of a business model?

a. Pricing model
b. Revenue model
c. Value proposition
d. Internet commerce
e. Action plan
ANSWER: e
POINTS: 1
14. The strategic choices that a business model addresses should reflect both the ____ and the ____ processes.
a. business concept / business plan
b. value chain / action plan
c. action plan / value capture
d. value creation / value capture
e. value creation / business concept
ANSWER: d
POINTS: 1
15. Among the costs to be considered in launching a new venture are:

a. Market or advertising costs
b. Inventory cost structure
c. Direct cost structure
d. All of the above
e. A and B only
ANSWER: b
POINTS: 1
16. Business models can change by:

a. Incrementally expanding the existing model geographically
b. Revitalizing an established model
c. Taking an existing model into a new area
d. All of the above

e. A and C only
ANSWER: d
POINTS: 1
17. What of the following is not a benefit to the customer?

a. Reliability
b. Speed
c. Convenience
d. Recyclable packaging
e. Better health
ANSWER: d
POINTS: 1
18. Among the reasons business models fail are all of these except:
a. Flawed logic
b. Insufficient capital
c. Limited strategic choices
d. Imperfect value creation and capture assumptions
e. Incorrect assumptions about the value chain
ANSWER: b
POINTS: 1
19. A precise ____ increases the chances that the business concept will meet the customers' needs.
a. customer definition
b. distribution channel
c. value proposition
d. customer benefit
e. elevator pitch
ANSWER: a
POINTS: 1
20. What of the following components of the business concept is least likely to ensure the success of the venture?
a. Customer demand
b. An effective business model
c. Money
d. A broad distribution channel
e. Value proposition
ANSWER: c
POINTS: 1
21. The components of a business model include all of these except:

a. A value proposition
b. Business concept
c. Strategic partners
d. None of these
e. B and C only are not components of a business model
ANSWER: b
POINTS: 1
REFERENCES: p. 73
22. The first two steps in building a business model involve ____ and ____.
a. identifying position in the value chain / developing competitive advantage
b. identifying position in the value chain / creating customer value
c. identifying investors / identifying competition.
d. creating customer value / identifying sources of revenue
e. developing competitive advantage / determining cost drivers
ANSWER: b
POINTS: 1
23. In a/an ____ cost structure, the primary costs of the business come from customer acquisition.
a. marketing
b. retail space
c. support centered
d. direct
e. inventory
ANSWER: a
POINTS: 1
24. The more information an entrepreneur acquires through ____, the higher the chance that his or her predictions will be
close to the mark, risk will be reduced and uncertainty managed.
a. market research
b. feasibility analysis
c. business concepting
d. concept analysis
e. value creation
ANSWER: b
POINTS: 1
25. The feasibility analysis is about ____ a new business concept.

a. developing
b. testing
c. planning
d. implementing
ANSWER: b
POINTS: 1
26. The feasibility analysis includes all of the following except ____.
a. industry analysis
b. market customer analysis
c. product service analysis
d. competitive analysis
e. investor analysis
ANSWER: e
POINTS: 1
27. Which type of business is most likely to be launched on the strength of a feasibility analysis alone?
a. Baked goods business
b. Technology business
c. Internet-related business
d. Clothing business
e. Investment business
ANSWER: c
POINTS: 1
28. Which of the following is one of the three broad questions that a feasibility analysis answers?
a. How will the operating systems be structured?
b. Do the capital requirements, based on estimates of sales and expenses, make sense?
c. Does the entrepreneur have enough passion for the business?
d. Does the entrepreneur have the experience to be competitive in the chosen industry?
e. Does the entrepreneur have enough family support to be successful?
ANSWER: b
POINTS: 1
29. The Macro Environment includes all of the following factors except:
a. The availability of credit
b. Market factors and trends
c. Industry factors and trends
d. Global economic factors
e. All of these are factors in the Macro Environment
ANSWER: a
POINTS: 1
30. Most successful startups involve ____.

a. only the founders
b. people with skills and capabilities beyond those that the business requires
c. solo entrepreneurs rather than teams
d. teams rather than solo entrepreneurs
e. people with MBAs
ANSWER: d
POINTS: 1
31. The value chain includes the ____.

a. investors
b. capital requirements
c. distribution channel
d. product/service design
e. employees
ANSWER: c
POINTS: 1
32. In general, the ____ is the one who pays for the product.
a. company
b. customer
c. importer
d. founder
ANSWER: b
POINTS: 1
33. A clear and precise definition of the ____ increases the chances that the business concept will meet the needs of the
market.
a. competition
b. employee base
c. customer
d. management structure
e. product
ANSWER: c
POINTS: 1
34. Most businesses today produce both products and services that provide ____, which gives the company a competitive
advantage.
a. better customer warranties
b. multiple revenue streams
c. better channels of distribution
d. more benefits to the customers
e. All of these choices
ANSWER: b

POINTS: 1
35. The question of how to deliver the benefit to the customer is answered by ____.
a. the value chain
b. the product
c. the service
d. the distribution channel
e. testing the concept
ANSWER: d
POINTS: 1
36. Uncertainty is characterized by:

a. Fear of failure
b. Varying degrees of risk
c. Incomplete research
d. The failings of a new venture
e. All of these
ANSWER: b
POINTS: 1
37. For a new product or service to be successful, it should ____.

a. not be too expensive
b. provide long-term utility
c. solve a problem that customers have
d. have a good warranty
e. be the leader in the product line
ANSWER: c
POINTS: 1
38. One part of the feasibility analysis addresses the business process. This part is called the ____.
a. product/service analysis
b. financial analysis
c. founding team assessment
d. industry analysis
ANSWER: a
POINTS: 1
39. ____ with customers should give the entrepreneur confidence that the solution being provided is recognized as
valuable by customers.
a. Product/service analysis

b. Customer analysis
c. Feasibility analysis
d. Competitive analysis
e. Market research
ANSWER: e
POINTS: 1
40. One way to innovate with business models is to consider:

a. Market research
b. A Feasibility analysis
c. A Competitive analysis
d. An Industry analysis
e. A “blue ocean strategy”
ANSWER: e
POINTS: 1
REFERENCES: 5.3 Innovating with Business Models
Subjective Short Answer
41. Imagine a college campus in an historic section of town with few affordable restaurants for students. The campus also
has a large group of international students without transportation. You are a restaurant owner on the edge of town looking
to provide food delivery to campus. Write a value proposition and a compelling story for this scenario.
ANSWER: The value proposition should include: the customer: students, faculty, campus visitors, and townspeople;
the benefits: convenience, better health, and low cost. The idea should make the customer think, "Why
didn't I think of that?" It should also appeal to emotion or the "pain."
POINTS: 1
42. Give a concise description of the four elements of a business concept opportunity.
ANSWER: The description should include the customer definition; the value proposition (or benefit to the
customer); the product/service being offered; and the distribution channel or means of delivering the
benefit to the customer.
POINTS: 1
43. What are the primary reasons that business models fail?
ANSWER: (1) flawed logic, (2) limited strategic choices, (3) imperfect value creation and capture assumptions, and
(4) incorrect assumptions about the value chain.
POINTS: 1
44. Briefly discuss the differences between a feasibility analysis and a business plan.
ANSWER: A feasibility analysis is about testing a new business concept, whereas the business plan is about
developing a business: its operations, staffing, growth, and financial plans.
POINTS: 1

45. What are the three questions that a feasibility analysis will answer?
ANSWER: Are there a customer and a market of sufficient size to make the concept viable? Do the capital
requirements to start the business, based on estimates of sales and expenses, make sense? Can an
appropriate start-up founding team be assembled to execute the concept effectively?
POINTS: 1
46. Briefly discuss the importance of the feasibility test.

ANSWER: The test contributes to an entrepreneur's understanding of the proposed new venture and to a decision
about the conditions that must be in place for an entrepreneur to feel comfortable moving forward to
consider launching the business. A feasibility analysis reduces risk and increases the chances of success.
POINTS: 1
47. Prepare a feasibility analysis for a product or service you have thought about in the past and that may have market
value. Answer the following questions: Is there a customer base? Do the capital requirements make sense? Can an
appropriate start-up team be assembled?
ANSWER: Student answers will vary but should address the three questions cited.
POINTS: 1
48. According to Peter Drucker, what five questions form the basis for developing a business model?
ANSWER: What is our mission? Who is our customer? What does our customer value? What are our results? What
is our plan?
POINTS: 1
49. Imagine that ATMs have never existed. Write a business concept statement for ATMs.
ANSWER: Students should include: customer definition; value proposition; product/service; and distribution
strategy.
POINTS: 1
50. Discuss the fundamental activities involved in creating a business model.

ANSWER: First, a successful venture creates value by differentiating itself from competitors and/or by meeting an
unserved need in the market. Second, it captures value by monetizing (to use another popular term) its
offering; in other words, entrepreneurs find ways to make money from what the businesses do. Both of
these activities take place within what has been termed a value network, which is the community of
partners, suppliers, and other members of the value chain with which the venture does business.
POINTS: 1

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Solution Manual for Launching New Ventures An Entrepreneurial

Approach 7th Edition Allen 1305102509 9781305102507

Cengage Learning Testing, Powered by Cognero Page 1

13. Which of the following is not a component of a business model?

15. Among the costs to be considered in launching a new venture are:

16. Business models can change by:

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17. What of the following is not a benefit to the customer?

21. The components of a business model include all of these except:

25. The feasibility analysis is about ____ a new business concept.

30. Most successful startups involve ____.

31. The value chain includes the ____.

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36. Uncertainty is characterized by:

37. For a new product or service to be successful, it should ____.

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40. One way to innovate with business models is to consider:

Subjective Short Answer

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46. Briefly discuss the importance of the feasibility test.

50. Discuss the fundamental activities involved in creating a business model.

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